It shouldn’t come to you as a surprise if your favourite restaurant is out of avocado. By now you should have an idea of how the market is behaving towards your favourite toast topping. The once an abundance fruit, avocado is quickly turning into a luxury item for only the lucky few. Who would have thought that an avocado could one day be so in fashion? The shortage has left hipsters and foodies in shock. What could have affected the supply and availability of the ‘super food’? How could it just disappear from the market? These are some of the questions being asked by many hungry, guacamole craving consumers.
Recent media reports could have exaggerated the current market situation, but they have horrified hipsters the world over. What is even more worrying about the recent reports is the idea that the already high prices are likely to spike. As of now, the prices are a record high and there seem to be no light at the end of the tunnel. This is indeed something that has gotten most foodies worried. To purchase an avocado today you must pay twice of the thrice of what was the cost some months ago. But how did we get here?
There has been uproar, particularly on the social media by hipster complaining about the scarcity and the high prices that the fruit has attracted in recent months. As usual, some may be arguing from the point of ignorance and coming up with many theories to explain their situations. One of the trending topics is how China has everything to do with the current shortage. But how factual is this claim?
One thing we must all agree is that the scarcity and high prices have everything with market forces. We know that high demand attracts high prices. This is what has been happening world over. There has been no withholding of the product, but the supply has gone extremely low from last years. From the economist perspective, there is nothing unusual about the current state of the avocado market. The situation is being informed by the various forces in the market. In fact, a close look at the situation shows that there have been two almost equal forces affecting this niche and thus the acute shortage and spike in price. These forces are the dwindling production and bulging consumers market.
Let us take a look at the supply end and establish how it could have contributed to the current state. There are several factors that we can identify from the supply that has contributed to the shortage the market is experiencing. According to the release records, the production of the avocado in South America nations has been adversely affected by various factors from last year. Countries such as Mexico which supplies almost a half of the international market had a very bad season from last years. Other countries such as Chile, Colombia, Peru, Dominican Republic and the United States among others also posted poor harvest. The drought in California and Mexico had a lot of significance in all this.
Climate change can be said to have affected the production of the fruits. The extended droughts in some of the most productive parts of the world are causing a sharp decline in production. It is important to note that export from Mexico dropped by half last season according to Hass Avocado Board. Another factor that is contributing to the reduced supply is the number of farmers moving away from the crop. This is due to the high production costs. One of the key problems has been the amount of water that the avocado plant requires to bear fruit in a season. The plant requires 1 million gallons per acre for it produce good yields. With increasing heavy draughts and heat, farmers are finding it difficult to water their farms adequately. The most hit are the small scale farmers. With the number of farmers shrinking in every season, the market will definitely feel the impact no matter how small it is.
Bulging Consumption Market
Ever the years, the consumption market has been expanding at a very high rate. The fact that the fruit can be used in various ways has made it very popular among the larger population. Apart from being a fruit, it has also been established to possess high medicinal value. These are just some of the factors that have contributed to its market expansion. Among the latest entrance into the avocado consumption market is China.
The entrance of Chinese into the market is believed to have destabilised the markets on the consumer end. With its sheer size of the middle-class population, the demand for the avocado has shot to the roof. Note that Chinese middle class is more than 100 million and they’re the main consumer of avocado. What’s more interesting the price at which the item is selling in the Chinese market. It has been established that Chinese middle class is willing to pay more for the product. This demand can be explained by the increase in export to China by various countries such as Chile. In short, China is a new and huge market that is opening up while the production of the item is stagnating or dwindling.
It is a fact that China has everything to do with the shortage of avocado on the consumer end. But there are also other factors on the supply side that contributed to this. Although China is contemplating of establishing its own domestic production, it will take time for the supply and prices of the avocado to normalise. For now, the hipsters and foodies will continue to pay more for avocado if they are lucky enough to even have access to a supplier.